Join Australia's most dynamic and respected property investment community

Calculating interest

Discussion in 'Accounting & Tax' started by beachgurl, 2nd Sep, 2015.

  1. beachgurl

    beachgurl Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    455
    Location:
    Sydney
    I'm currently working on my tax prep for the accountant. We got a few loan top-ups against our PPR to use for one of our development projects, so the top up funds were drip-fed out of the offset account over a 12 month period. At the time it wasn't possible to have the top up funds as a separate split, which would've made life much easier.

    How do I calculate the interest paid on that amount? Do I need to calculate as a daily amount based on the interest rate at that date or is there an easier way and I'm overthinking it?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,589
    Location:
    Adelaide, SA
    Is it an interest only or P&I loan? The former is fairly simple and the latter can be tricky :p
     
  3. devank

    devank Look, lets just get on with this, ok? Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    727
    Location:
    Inner West - Sydney
    Whatever you do.... hide this thread from Terry. He is going to be really disappointed with you :)

    I have attached a sample interest splitting spreadsheet. Now you have dates and associated interest split in percentage.

    Now, take your interest charges table. Using the dates, use VLOOKUP to attached the interest percentage split.

    Then you can easily calculate the interest belongs to each type of investment.
     

    Attached Files:

    D.T. likes this.
  4. beachgurl

    beachgurl Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    455
    Location:
    Sydney
    Interest only

    Thank you Devank. I'll have my IT guy put WinZip on my computer once he gets home from work and I'll take a look.
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,384
    Location:
    Sydney
    I will whisper in case Terry hears....I'm with Devank here. Its clumsy but sometimes its the only way to blend loans. The ATO would just want to ensure your basis of apportioning the actual cost is reasonable. Its a very easy item to detect too.. They ask for statements then scan down the loan debits. They query each payment and seek information on what was paid from the loan. You want to avoid a concern you are over inflating the interest on say a IP v's a development where the interest may be treated differently. Its common to find a loan with two purposes - ie IP1 and IP2. They can be a bit easier since both are deductible - You may bit over on one and under the other. With Steele's decision in mind its possible the dev interest is also deductible IF all dev is to be rented for income. So its possible its no big issue. If you plan to sell though may need to be diligent.

    The issue that raises a red flag is when the split in unreasonable. The ATO wont argue it they just deny it. All.
     
  6. devank

    devank Look, lets just get on with this, ok? Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    727
    Location:
    Inner West - Sydney
    Windows explorer can unzip it. You don't need an IT guy. Just double click and then copy & paste to another folder.

    Sorry the upload didn't work with xls extension.